The higher education bubble

I read an interesting exchange of ideas on education that started with an essay about PayPal founder Peter Thiel. He claims that now that the housing bubble has burst, we have a new bubble: higher education.

“A true bubble is when something is overvalued and intensely believed,” he says. “Education may be the only thing people still believe in in the United States. To question education is really dangerous. It is the absolute taboo. It’s like telling the world there’s no Santa Claus.”

Sarah Lacy, the author of the essay, writes, “[O]ver the last year, as unemployment hovers around double digits, the cost of universities soars and kids graduate and move back home with their parents, the once-heretical question of whether education is worth the exorbitant price has started to be re-examined even by the most hard-core members of American intelligensia.”

Lacy continues, “Thiel’s solution to opening the minds of those who can’t easily go to Harvard? Poke a small but solid hole in this Ivy League bubble by convincing some of the most talented kids to stop out of school and try another path. The idea of the successful drop out has been well documented in technology entrepreneurship circles. Thiel . . . came up with the idea of the “20 Under 20″ program last September. The idea was simple: Pick the best twenty kids he could find under 20 years of age and pay them $100,000 over two years to leave school and start a company instead.”

“[P]eople who’ve read my previous posts know that I have a very strong opinion about education: that it is absolutely necessary in order for you to build a foundation for success. Despite having appointments at five elite universities, I am not a proponent of elite education. Rather, my research led me to conclude that ivy-leaguers may be able to get their buddies from Sequoia and Kleiner to return emails, but aren’t going to be any more successful at building companies; that what matters is gaining a basic education and completing what you started—not the ranking of the school you graduate from.”

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So if the institution is less important than the fact that you earned a degree, what is it about that degree that’s so important? I don’t think it has anything to do with academic learning. If it were, then elite institutions with higher academic standards would be providing greater return on the student’s investment of tuition dollars. But the data simply doesn’t support that notion.

Completing a degree, regardless of what institution you attend, means that you have demonstrated the ability to set a goal, overcome obstacles, stay focused over along period of time, and maintain the discipline necessary to see it all the way through to the end. That seems to be a major differentiator.

Now we have a nation filled with people who have been certified by the system—they have a piece of paper that proves they can set a goal and achieve it over four years—and they’re finding that certification not worth as much as it used to be. This is Thiel’s higher education bubble.

What’s next? Thiel’s goal of supporting entrepreneurship is too limited, but I believe he’s on to something. Once you’ve proven that you can finish something, can you also prove that you have the creativity and imagination to start something original? In other words, a college degree proves you can follow directions. But can you also lead? That, I think, will be the next big differentiator.

Here’s where the bubble bursts, and it may be the point that Thiel is trying to prove with his “20 Under 20″ program: you don’t need to pay a quarter of a million dollars to a university to prove to the world that you have the ability to start something original and see it through to the end.